The Composite Index of Nonmanufacturing Sector Activity from
the Institute for Supply Management (ISM) fell to 53.9 during July from 57.4 in
June. It was the lowest level for the index since August of last year. The
Action Economics Forecast Survey expected a slight decline to 57.0. The ISM data
are diffusion indexes where readings above 50 indicate expansion.

Haver Analytics constructs a Composite Index using the
nonmanufacturing ISM index and the ISM factory sector measure released Tuesday.
This composite declined to 54.2 in July, its lowest level also since August.
During the last ten years, there has been a 73% correlation between this index
and the q/q change in real GDP.

Each of the nonmanufacturing index component series declined
last month. The business activity index dropped to 55.9, also an eleven month
low. The new orders reading dropped sharply as well to 55.1. The supplier
delivery index eased to 51.0, indicating the quickest delivery speeds since February.

The employment measure declined to 53.6, the lowest level in
three months. During the last ten years, there has been an 89% correlation
between the ISM nonmanufacturing sector jobs index and the m/m change in private
service plus construction sector payrolls. A greatly lessened 26% (NSA) of
industries reported a rising jobs level while a moderately higher 14% indicated a decline.

The prices paid index increased to 55.7. That added to its
June increase, but the index remained below its January high of 59.0. A stable
19% (NSA) of firms reported paying higher prices while a lessened four percent
of firms reported them lower.

Amongst the other detail indexes, which are not seasonally
adjusted, export orders fell m/m to 53.0 and was down sharply versus the 65.5
April high. The import index rose slightly m/m to 51.5, but remained down y/y.
The order backlog index eased m/m, but remained up versus twelve months earlier.

The ISM figures are available in Haver's USECON
database, with additional detail in the SURVEYS database. The
expectations figure from Action Economics is in the AS1REPNA database.

Bridging the Gap: Forecasting Interest Rates with Macro
Trends from the Federal Reserve Bank of San Francisco is available
here.